Understand the time value of money

The time value of money means that money received today is worth more than money received in the future. Today’s money has the ability to grow through interest over time. Saving money now, especially in an interest-earning account, puts your money to work for you.

Saving money early allows more time for your deposits (the principal) to compound in value because it earns interest. As long as you do not withdraw large sums from the account, your principal and the interest earned will continue to compound as even the interest earns interest.

The magic of the time value of money is that individuals who save early in life reap an advantage over those that save later because their money is earning interest for a longer period.

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